Microconomics

Competitive Industry : Bottled Water

2006

In recent years , people have been flocking to the stores to pay top dollar for something they get virtually free out of their taps . The bottle water industry has grown to a substantial market where it is estimated that Americans consumed over 7 .5 billion gallons of bottled water during 2005 , or 26 .1 gallons per person , second in consumption to only soft drinks (Woo 2006 . Companies such as Pepsi and Coke have brought their own brands to the marketplace , while other companies offer water which

has been infused by oxygen , colored , or enhanced with nutrients or herbs (Woo 2006

It is estimated that world sales for bottled water is 22b US , with the annual market growth between 3 in Africa and Western Europe , to 15 in Asia and the Pacific . Thousands of employees work for several hundred different companies , making this a highly competitive market (Ferrier 2001 , p12-13 . Although the competition to get their product in the hands of the consumer are difficult , companies profit margins are not affected , with profits estimated to be between 25-30 (Ferrier 2001 br

.13

The demand for bottle water can be broken up into two segments . As urbanization occurs , and people have easier access to markets and grocery stores , the consumption of bottled water increases . These people believe that they are receiving a higher quality product than what is available in their tabs (Ferrier 2001 ,

.18 . This can constitute the trendy consumer who consumption is based on many factors such as price disposable income and alternative solutions . The second group of consumers is based on the necessity of having portable , clean water that is not available through their infrastructure . In China for example two-thirds of the population suffer from water shortages , while sixty percent of urban waterways are polluted (Yangzi Delta Region 2003

What has made bottled water popular has more to do with marketing than with actual quantifiable health reasons . Many people believe that bottled water contains less chemicals then tap water or is better regulated , however this is not true . While many companies advertise their water as either spring or mineral water , coming from an underground source , over 25 percent of all bottled water come from a tap and are further filtered . To add to their appeal , and help foster the belief that the water is healthier , most bottles display images of natural and clean environments (Wells 2000

In a blind taste test , many people cannot identify the difference between tap and bottled water . Although products such as oxygen infused water such as OxEnergy and Flo2 make claims that an athlete will perform better with the extra oxygen , specialists disagree . These companies have cited NHL hockey teams who have accredited their ability to win games to the product . A researcher at McMaster University states that the amount of water they would need to consume for a player to receive enough oxygen to make a difference would be a few hundred liters during a game . He...